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The Philippines' state pension fund may become the latest government scheme to branch out into alternative asset classes such as hedge funds and private equity after launching a search for up to three fund managers to run an overseas portfolio of $1bn (â¬732m) that may include such investments.

In May the fund requested proposals for initial mandates of $300m with a target return of at least 8% per year on average net of fees and portfolio volatility of no more than 7%.

The asset managers will be allowed make overseas investments in most asset classes, including private equity and hedge funds, as long as they maintain the target return and volatility profile. However, they are restricted from investing in commodities or commodity derivatives. No more than 30% of each mandate can be invested in illiquid assets.

The $1bn budget is around 12% of the total assets held by the fund. The remaining 88% will remain invested domestically.

GSIS president and general manager Winston Garcia said: “This strategy aims to diversify risks on our investments, maintain consistently high investment yields and put into practice good corporate governance over our investments. When we embarked on the global investment programme, we realised that we do not have the expertise and the infrastructure to invest abroad.”

The proposal also asks the chosen fund managers to provide training to the fund's staff in investment strategies and asset management.